Blockchain use cases resulting from Federal Government’s strategy for the energy sector (February 2020)
I. Where is blockchain technology currently used in the energy sector?
Currently, there are various use cases in the energy industry for blockchain technologies where the technology creates or could potentially create benefit. These range from pricing to changing suppliers to the design of prosumer roles. The latter becomes particularly relevant in a more decentralised energy market. Many consumers are already active market participants with their own energy sources such as solar and geothermal energy. With the expected smart meter rollout in 2020, intelligent metering systems will become part of their everyday lives. Whether the smart meter gateway can use blockchain to link data from energy production, storage and consumption is currently being investigated in a feasibility study by the BMWi (Ferderal Ministry for Economic Affairs and Energy).
Other current use cases for blockchain technology can be found in e-mobility (charging infrastructure), electricity trading via peer-to-peer platforms (certification of green and regional electricity products) and plant management (use of decentralised micro facilities for congestion management). Finally, certification offers a large and promising field of application for blockchain. The tamper-proof storage of data enables a traceable documentation of transactions. This applies, inter alia, to labelled green and regional electricity, tradable CO2 certificates or the documentation of feed-in and consumption.
The potential of blockchain technology for the energy turnaround can be considered as being significant. This increasingly widespread technology is putting the energy sector to the test, not only through its use but also through the increasing electricity and resource consumption in the overall view of the application areas. It must therefore be ensured that any positive effects of an expansion of applications in terms of transparency and process efficiency are not offset by significant negative effects in terms of climate and resource protection.
The risks and chances of blockchain technology for the energy turnaround are currently being examined in various projects funded by the Federal Government.
II. What is the Federal Government’s aim for the energy sector?
The Federal Government wants to make Germany a pioneer in the use of blockchain technology. Key principles are the support of investment and innovation, sustainability, IT and data security and the digital European single market. The Government considers openness and neutrality in regard of new technologies as being highly important. The following projects are part of their blockchain strategy for the energy sector:
- In the 7th Energy Research Programme of the Federal Government, the aspects of digitisation relevant to energy use are being investigated.
- Within the framework of Smart Service World II, practical lessons are learned from blockchain use in the energy industry. Examples are blockchain based virtual large-scale storage for PV system operators and energy peer-to-peer trading.
- In the “SINTEG” showcase program, five large model regions have been established to test sample solutions for a digitalised energy industry.
- The Copernicus project “ENSURE – New Network Structures” approaches using different solutions the problems of decentralizing the energy production.
- Furthermore, the Federal Government commissioned the feasibility study “blockchain based recording and control of energy systems using smart meter gateways” in May 2019. The results are yet to be published. The project phase is expected to start in 2020, subject to a positive final feasibility assessment.
- In order to test the various research projects in practice, the Federal Government is also planning a cross-technology pilot laboratory for the energy sector. The lab will examine possible synergies with other technological innovations such as artificial intelligence or Big Data. To use the large amount of data generated in the energy sector more effectively for blockchain applications, it is being examined whether the data could be made available to third parties in research and industry in compliance with the GDPR.
- Last but not least, the Federal Government is supporting the digitisation of contractual relations in the energy sector. Smart contracts have great potential for automation and increased efficiency in particular in the energy industry. This makes the transformation of contractual relationships into digital language or digital code all the more important. The Federal Government will therefore begin to set up a register that will list contractual issues in the energy industry and thus make it possible to record and systematise smart contracts. Together with the German Energy Agency (dena) and representatives from science, business and society, it will initially be discussed which issues and content can be transferred into smart contracts. The aim will be to set up a public platform which is freely accessible and whose contents are permanently viewed, evaluated, discussed and commented on. In this way, the register can support users and developers in the design of smart contracts by providing historical data. The smart contract register in the energy industry is to serve as a model for other economic sectors and as a basis for the design and development of further registers.
III. What is the legal framework for the use of blockchain in the energy sector?
The legal implications of blockchain use in the energy sector cannot yet be fully predicted. Nevertheless the most important areas of law and already some concrete legal questions have been identified. The data protection law will be concerned in regard of the ‘right to be forgotten’ in Art. 17 GDPR, when blockchain promises to be an unforgettable system. Smart contracts can be subject to the provisions of Art. 22 GDPR, if no human being participates in the decision made. In accordance with general civil law policies such as avoidance, withdrawal or nullity it will be necessary to make reverse transactions possible, which partly contradicts the purpose of the blockchain.
In the energy sector it is expected to have fewer legal disputes, for with the use of blockchain the change of provider will be possible at any time and calculations will become more transparent. However, there are still legal issues to be resolved. For example, the supervisory authorities always require a deliverable address for administrative acts, which conflicts with the decentralised energy production of the future.
Blockchain in the energy industry is still in its early stages but it has a good basis for further development. Depending on the willingness of the energy industry to invest, this can lead to the optimization of processes and the development of new business fields. On the other hand, business areas such as sales will decrease, if electricity trading takes place directly between the prosumers. Here, it is important to ensure good networking between the research projects of the Federal Government and practical application in industry. From a legal point of view, it will have to be assessed in the future to what extend the use of blockchain might change existing laws. However, there are pitfalls in adapting the technology to the existing legal situation. In the end, the practical application in the market will show what still needs to be done in legal terms.